Economic Sanctions and the Politics of IMF Lending

Dursun Peksen, Byungwon Woo

Research output: Contribution to journalArticle

Abstract

What effect do economic sanctions have on the IMF lending decisions? Though countries under economic sanctions often face significant economic and financial difficulties, no comprehensive research to date has explored whether the IMF as a de facto lender of last resort intervenes in those countries in need. We posit that economic coercion is likely to hinder the target’s access to IMF credits as sanctioning (sender) countries are likely to use their political influence in the IMF to deny funds to the destabilized target economies. To assess the empirical merits of the hypothesis, we combine data on the IMF lending with the economic sanctions data for 120 emerging market economies from 1975 to 2005. Results indicate that target countries are less likely to receive IMF funds, especially when under sanctions by the United States and international institutions. Our findings contradict the conventional wisdom that the IMF is tasked with providing lifelines to member governments in need of help to ease their short-term balance of payment problems. Further, as much as IMF loans can be used as positive inducements to acquire a country’s strategic cooperation, we show that they might also be used by sender countries as a punishment tool against target countries to amplify the impact of sanctions regimes.

Original languageEnglish
Pages (from-to)681-708
Number of pages28
JournalInternational Interactions
Volume44
Issue number4
DOIs
Publication statusPublished - 2018 Jul 4

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economic sanction
IMF
lending
politics
sanction
balance of payments
political influence
market economy
loan
wisdom
economics
penalty
credit
economy

All Science Journal Classification (ASJC) codes

  • Political Science and International Relations

Cite this

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Economic Sanctions and the Politics of IMF Lending. / Peksen, Dursun; Woo, Byungwon.

In: International Interactions, Vol. 44, No. 4, 04.07.2018, p. 681-708.

Research output: Contribution to journalArticle

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